3M and Cogent Systems entered into a definitive agreement for 3M's acquisition of Cogent for US$10.50 per share. The proposed transaction has an aggregate value of approximately $943 million, or approximately $430 million net of cash acquired. Cogent provides finger, palm, face and iris biometric systems for governments, law enforcement agencies, and commercial enterprises.
The agreement provides for a subsidiary of 3M to commence a tender offer to purchase all outstanding shares of Cogent within ten business days.
The Board of Directors of Cogent has unanimously recommended that the shareholders of Cogent accept the offer and Ming Hsieh, Cogent's Founder and CEO, and certain entities affiliated with him have agreed to tender their shares to the offer. The offer will be subject to the tender of a majority of Cogent's shares and to certain other customary closing conditions. The transaction is expected to close during the fourth quarter of the year.
Cogent participates in the $4 billion global biometric market, which is projected to grow at a rate greater than 20 percent per year. Its automated fingerprint/palmprint identification systems, or AFIS, enable customers to capture fingerprint and palm print images electronically, encode prints into searchable files, and accurately compare a set of fingerprints/palm prints to a database containing potentially millions of prints in seconds.
“Cogent Systems has done a tremendous job establishing a strong presence in the biometric industry,” said Mike Delkoski, VP and GM, 3M Security Systems Division. “Adding Cogent Systems' products to our business strengthens our product portfolio and services in high security credential issuance and authentication systems and positions 3M's business in law enforcement applications. It also expands our reach into access control and other commercial ID and authentication applications.”
“3M can accelerate our growth and extend our reach in global border control markets, law enforcement and commercial applications,” Hsieh said. “Together, we'll deliver a broader range of identification and authentication solutions to the security industry and to our customers.”
On a GAAP reported basis, 3M estimates the acquisition to be $0.09 to $0.10 dilutive to earnings in the first 12 months following completion of the transaction. Excluding purchase accounting adjustments and anticipated integration expenses, 3M estimates the acquisition to be $0.01 to $0.02 accretive to earnings over the same period. First year EBITDA, excluding purchase accounting and integration costs, is expected to be approximately 35 percent-to-sales.
With approximately $130 million in revenue in 2009, Cogent is based in Pasadena, California, and employs approximately 500 people. Cogent would be part of 3M's Security Systems Division. Hsieh will remain an integral part of the combined business going forward.